Treasury yields fall for 2nd week as Trump fails to muster support for health-care bill

Treasury yields declined on Friday, cementing their second-straight weekly drop, as recalcitrant House Republicans handed President Donald Trump his first major political defeat by refusing to support his bill to repeal and replace Obamacare.

Friday’s drop topped off a sharp weekly drop for Treasury yields, which rise as prices fall. Both the two- and 30-year Treasurys cemented their largest weekly gain since the summer. For the 10-year, it was the largest in a month. Yields have now fallen for two consecutive weeks.

The two-year note
TMUBMUSD02Y, +0.91%
finished marginally lower at 1.248%. The yield on the 30-year bond
TMUBMUSD30Y, +0.53%
was down 2.8 basis points at 2.999%. Bond yields move inversely to prices. For all three bonds, it was the lowest end-of-day level since Feb. 28.

Trump delivered an ultimatum to congressional Republicans late Thursday, saying they could either pass his bill as-is on Friday, or he would leave Obamacare in place and move on to other legislative priorities.

But after struggling to rally support for the bill, Trump told a reporter at the Washington Post Friday afternoon that the vote on the bill, which Trump had promised would happen Friday, had been called off. Reports suggested that the president would now “move on” from health care.

But health-care reform, which many had believed would pass relatively easily given that the GOP holds majorities in the House and Senate, is proving more challenging.

“Investors were probably thinking this was going to happen a little quicker,” said Charlie Ripley, assistant vice president of capital markets and trading at Allianz Investment Management.

On the economic-data front. a Census Bureau survey of durable-goods orders showed orders for core goods placed with domestic manufacturers declined in February, dashing investors’ hopes for a modest increase. Meanwhile, a preliminary reading on the Markit Flash Services PMI suggested that the U.S. service sector has experienced only lackluster growth in March.

“Soft” data, a category that includes surveys like the durable-goods indicator, have improved markedly since the election, reflecting increased optimism about the pace of economic growth. But, Ripley said, he’s hoping to see “hard” data, like reports on manufacturing activity and gross domestic product, will see a commensurate improvement.

“There’s definitely a lot of optimism in the market and we’d like to see that soft data and the hard data converge at some point,” Ripley said.

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